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Anomaly in Limitation date for completion of Transfer Pricing Assessment Proceedings for AY 2018-19: An Excellent compilation by KSCAA
13th July 2021
Smt. Nirmala Sitaraman
Hon’ble Union Minister for Finance and Corporate Affairs
Government of India, North Block
Sub: Anomalyin Limitation date for completion of Transfer Pricing Assessment Proceedings for AY 2018-19
The Karnataka State Chartered Accountants Association (R) (in short ‘KSCAA’) is an Association of Chartered Accountants, registered under the Karnataka Societies Registration Act, in the year 1957. KSCAA is primarily formed for the welfare of Chartered Accountants and represents before various regulatory authorities to resolve the problems / hardships faced by Chartered Accountants and business community.
As the second wave of the Covid-19 pandemic has ravaged the country for the past two months and ever since, the country is slowly regaining impetus towards economic and overall stabilization and growth. At this juncture we would like to humbly submit to your good selves a representation highlighting an anomaly in Transfer Pricing proceedings (‘TP proceedings’) concerning the AY 2018-19. Kindly consider our detailed representation as below.
Background and Facts
As per sub-section 1 ofsection 153 read with first proviso to that sub-section of the Income Tax Act 1961 (‘the Act’), the order of assessment for AY 2018-19 is required to be issued by the Assessing Officer (‘AO’) within 18 months from the end of the AY. That is the assessment for AY 2018-19 should be completed by the AO by 30th September 2020. However if a reference was made to the Transfer Pricing Officer (‘TPO’), then in terms of section 153(4) the said timeline gets automatically extended by 12 months and therefore the extended last date for completion and issuance of order of assessment for AY 2018-19 would become 30th September 2021.
As the first wave of COVID-19 pandemic had unleashed its fury early and mid-last year, the Ministry of Finance vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (TOLA) had pushed the last date of assessment completion from 30 September 2020 to 31 March 2021. Subsequently the Finance Ministry by exercising the powers conferred u/s 3 of TOLA has issued multiple notificationsto further extend thelast date for issuance of assessment orders for AY 2018-19 as detailed below –
- Firstly, from 31stMarch 2021 to 30thApril 2021 vide Notification No. 10/2021 Dated 27th February, 2021.
- Secondly, from 30thApril 2021 to 30thJune 2021 vide Notification No. 38/2021-Income Tax, Dated: 27th April, 2021.
- Latest being, from 30thJune 2021 to 30thSeptember 2021 vide Notification No. 74/2021-Income Tax Dated: 25th June, 2021
It would be worthwhile to note that as per Section 153(4) of the Act, wherein a reference to the TPO has been made during assessment proceedings, the TPO shall take up the matter and pass the order at any time before 60 days prior to the period of limitation referred to in section 153(4).
As mentioned above, the extended last date for completing the assessment for AY 2018-19, as on today is 30th September 2021 and in accordance with section 153(4) the same should get automatically extended by 12 months to 30th September 2022. On a harmonious reading of both the provisions of section 153(1) and section 153(4) and considering the law as on date, the TP proceedings should get completed by 31 July 2022 and by 31 September 2021 AO to complete the final assessment. The 12 months extension of last date for completion of assessment of TP referred cases as contemplated in section 153(4) is to ensure that the TPO has sufficient time at his disposal for smooth completion of TP assessments and then revert back to AO at least 60 days prior to extended last date. Hence the extension as envisaged in section 153(4) is completely dependent on the last date as contemplated u/s 153(1) and therefore it moves forward as the last date u/s 153(1) move forward. In the background of the above discussions on the interpretation of provisions, we hereby humbly submit to your good selves the correct due date for conclusion of TP proceedings should be 31st July 2022 and last date for completion of assessment should be 30th September 2022.
Ironically it has come to our observation that the Board as per the Office Memorandum dated 28th June 2021, has taken a hyper-technical view on the matter of last date for completing TP assessments for AY 2018-19 by stating that the last date shall be 31st July 2021 leaving merely a month’s time to complete the TP assessment by TPO. This office memorandum if followed would completely defeat the purpose of TOLA and other collateral measures which the Government has introduced to ease the burden of taxpayers in these pandemic times.
Additional points for consideration:
- The new income tax portal which was commissioned from 8 June 2021 had and is still being debugged for several glitches and non-functioning services which has made the process of e-filing and co-ordination all the more difficult. Taxpayers have been facing issues in uploading submissions, viewing notices and responding to notices, etc.
- TP proceedings have always been voluminous and fact intensive wherein each issue requires a lot of deliberation of the law, the general practice and the judicial precedents on the said issue. Hence, the task of completing such a monumental assessment within a timespan of effectively 25 days (from the date of unlock to the Board’ due date), would result in an extremely detrimental situation for the taxpayers, which in turn would result in cases being piled up before the Tax tribunals, High Courts and ultimately, the Supreme Court.
- In addition, in January 2021, the TP proceedings for AY 2017-18 was completed and the first level of appeal is yet to be filed for these matters before the appellate authorities, due to an extension being granted by the government as well as the Supreme Court taking cognizance of the situation on hand and issuing the order dated 27 April 2021, wherein the timelines for filing appeal for judicial and quasi-judicial matters was relaxed until further orders. Hence, completing the TP assessment for two years within a span of 5 months would be unrealistic and result in injustice to the taxpayers.
As the timeline for completing the assessment (non-TP cases) for AY 2018-19 as on today is 30th September 2021 and on harmonious reading of both section 153(1) and section 153(4) and considering the law as on date, the TP proceedings for AY 2018-19 should fall due for completion on or before 31st July 2022 in place of of 31st July 2021 as contemplated in the office memorandum (supra). We at KSCAA hereby humbly request your good selves to issue necessary clarifications to iron out the creases, anomalies and confusions that are currently prevalent on this issue in the tax ecosystem comprising of taxpayers, tax professionals and also tax administration.
For Karnataka State Chartered Accountants Association ®
CA. Kumar S Jigajinni CA. Pramod Srihari CA. Ganesh V Shandage
President Secretary Chairma Representation Committee
Copy to –
- Bhagwat Karad, Hon’ble Union Minister of State for Finance, Government of India
- Shri Pankaj Chaudhary, Hon’ble Union Minister of State for Finance, Government of India
- Tarun Bajaj, Revenue Secretary, Department of Revenue, Ministry of Finance, Government of India
- J B Mohapatra, Chairman – Central Board of Direct Taxes